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Yields on 10-Year Treasurys Plumb a New Bottom

Concerns about the U.S. economy Wednesday pushed investors into the safety of U.S. Treasurys, helping the government borrow at the lowest cost in the history of 10-year auctions.

An economic report that showed a drop in consumer spending last month fueled significant demand for the asset, a safe haven for investors in a down economy.

The $21 billion of 10-year Treasurys was sold at a record-low yield of 1.622%.

"Market participants are in a very uncertain state here," said Robert Tipp, chief investment strategist and Prudential Fixed Income. "We've seen a lot of confusion about Europe and a confluence of weaker U.S. data for some time."

The recent run of U.S. economic reports has reflected the country's uneven pace of recovery. Wednesday morning's releases added to those concerns, showing a decline in retail sales last month.

Separately, producer prices fell in May on the back of falling energy prices.

Both reports bolstered the case for the Federal Reserve to deliver more cheap-money stimulus, though views on the topic are still very much divided ahead of the central bank's June 19-20 policy meeting.

Ongoing worries about the euro-zone debt crisis also are keeping U.S. Treasurys in demand. Bond-fund managers point to the June 17 Greek national elections as their most immediate source of concern. The outcome of this election is seen as a deciding factor in whether Greece ultimately stays in or exits the euro zone.

Late Wednesday, Egan-Jones reduced its credit rating on Spain to CCC+ from B. This sparked a deeper dive in U.S. stocks, which funneled more money toward Treasurys, pushing prices to session highs.

Wednesday's auction followed a mediocre sale on Tuesday of three-year notes, which saw indirect interest drop to its lowest level since 2007. The difference between the two sales suggests investors are clawing for yield within the safe-haven market and being forced to buy longer maturities to find it.